Fair Value Measurements

3 Months Ended

Jun. 30, 2023

14. Fair Value Measurements

The following summarizes financial assets and liabilities measured at fair value, by level within the fair value hierarchy:

	June 30, 2023								March 31, 2023
			Fair Value Measurements								Fair Value Measurements
			Using Inputs Considered as								Using Inputs Considered as
	Fair Value		Level 1		Level 2		Level 3		Fair Value		Level 1		Level 2		Level 3
Assets
Short-term investments
Mutual funds	$	2,159,000	$	2,159,000	$	-	$	-	$	2,011,000	$	2,011,000	$	-	$	-
Prepaid expenses and other current assets
Forward foreign currency exchange contracts		4,389,000		-		4,389,000		-		3,889,000		-		3,889,000		-

Liabilities
Other current liabilities
Deferred compensation		2,159,000		2,159,000		-		-		2,011,000		2,011,000		-		-
Convertible notes, related party
Compound Net Derivative Liability		8,570,000		-		-		8,570,000		8,430,000		-		-		8,430,000

Short-term Investments and Deferred Compensation

The Company’s short-term investments, which fund its deferred compensation liabilities, consist of investments in mutual funds. These investments are classified as Level 1 as the shares of these mutual funds trade with sufficient frequency and volume to enable the Company to obtain pricing information on an ongoing basis.

Forward Foreign Currency Exchange Contracts

The forward foreign currency exchange contracts are primarily measured based on the foreign currency spot and forward rates quoted by the banks or foreign currency dealers (See Note 13).

Compound Net Derivative Liability

The Company estimates the fair value of the Compound Net Derivative Liability (see Note 7) using Level 3 inputs and the Monte Carlo simulation model at the balance sheet date. The Monte Carlo simulation model requires the input of subjective assumptions including the expected volatility of the underlying stock. These subjective assumptions are based on both historical and other information. Changes in the values assumed and used in the model can materially affect the estimate of fair value. This amount is recorded within convertible notes, related party in the condensed consolidated balance sheets at June 30, 2023 and March 31, 2023. Any changes in the fair value of the Compound Net Derivative Liability are recorded in change in fair value of compound net derivative liability in the condensed consolidated statements of operations.

The following assumptions were used to determine the fair value of the Compound Net Derivative Liability:

	June 30, 2023			March 31, 2023
Risk free interest rate		4.09	%		3.64	%
Cost of equity		22.30	%		21.80	%
Weighted average cost of capital		14.70	%		14.60	%
Expected volatility of MPA common stock		50.00	%		50.00	%
EBITDA volatility		40.00	%		35.00	%

The following summarizes the activity for Level 3 fair value measurements:

	Three Months Ended
	June 30,
	2023
Beginning balance	$	8,430,000
Changes in fair value of Compound Net Derivative Liability included in earnings		140,000
Ending balance	$	8,570,000

During the three months ended June 30, 2023, the Company had no significant measurements of assets or liabilities at fair value on a nonrecurring basis subsequent to their initial recognition.

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their fair value due to the short-term nature of these instruments. The carrying amounts of the revolving loan, term loan and other long-term liabilities approximate their fair value based on the variable nature of interest rates and current rates for instruments with similar characteristics. At June 30, 2023 and March 31, 2023, the net carrying amount of the Convertible Notes was $31,252,000 and $30,994,000, respectively, with unamortized debt discounts and debt issuance costs of $9,318,000 and $9,436,000, respectively, and Compound Net Derivative Liability of $8,570,000 and $8,430,000, respectively. The estimated fair value of the Company’s Convertible Notes was $32,752,000 using Level 3 inputs at June 30, 2023. The net carrying amount of the Convertible Notes approximated their fair value at March 31, 2023, as they were issued on March 31, 2023.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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